Leveling the Playing Field for Booksellers

Things are heating up for Amazon.com on the sales tax front again. The California Senate just passed a bill that would require online retailers like Amazon to collect sales tax on web purchases. According to reports, the measure was part of a $5 billion budget package making its way through the California legislature. Virginia, Colorado and Illinois are also considering sales tax bills targeting online retailers.

Amazon — which only collects sales tax in a handful of states, giving it an advantage over brick-and-mortar retailers — fought hard against a similar wave of bills last year, and managed to stomp out most of them. But for cash-strapped states, desperately seeking new sources of revenue, the "Amazon tax" continues to be a powerful draw.

California lawmakers introduced a similar bill last year, but Gov. Arnold Schwarzenegger threatened to veto it, and the matter was dropped. But with California in the midst of a budgetary meltdown, the idea has popped up again. According to reports, the "Amazon tax" bill is expected to generate $107 million in tax revenue annually for California.

The measure has yet to be signed by the Governor, but with California in fiscal crisis, he may just sign the bill this time.

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The new California bill, like the one last year, says that online retailers like Amazon that work with local affiliates have a physical "nexus" in the state and are thus required to collect sales taxes. Affiliates are websites that link to Amazon products in exchange for a fee on any resulting sales.